Pirate Busters - American Shipper

Trade Forecast 2009
Armageddon or Schumpeter redux?
Positioning your supply chain for recovery
EXECUTIVE SUMMARY
Though many have
quarreled with (or
misinterpreted) some
of the conclusions reached in
Joseph Schumpeter’s 1942
book Capitalism, Socialism
and Democracy, few would
deny his title to the concept
of evolutionary creative destruction
and its impact upon
corporate demise, resiliency
and survival throughout the
past century.
One need only look at the
companies listed as components
of the Dow Jones
Industrial Average over the
New orders/shipments
40%
30%
20%
10%
10%
20%
30%
40%
Sources: U.S. Department of Commerce, Global Insight, Material Handling Industry of America, 2009
last 100 years to confirm the hypothesis. Schumpeter argued that
entrepreneurs are the critical change agents whose challenges to
status quo fuel and refuel economic growth.
If ever there were a time for entrepreneurship, it would seem to
be now. Our intent here is to take stock of where we are, assess
the impact and issue a clarion call for proactive entrepreneurship
to cut our losses, improve current performance and better position
our organizations for accelerated recovery when the tide turns.
Underestimates of the economic downturn’s impact on supply
chain infrastructure have left a landscape of overcapacity, cancelled
or deferred projects, and mothballed ships, trucks, warehouses and
distribution centers across the country.
• The Council of Supply Chain Management Professionals’ 2009
State of Logistics Report puts the numbers in perspective. With a
7.8 percent decline in industrial production in 2008, logistics costs
as a percentage of gross domestic product dropped 3.5 percent to
$1.3 trillion. CSCMP said the trend, which has devastated many
service and equipment providers, will continue through 2009 and
is unlikely to see a major correction before at least mid-2010.
• U.S. freight transportation has stalled at its lowest level since
1997, according to the U.S. Department of Transportation’s Bureau
of Transportation Statistics. Total import volume at major U.S. ports
is now expected to be 12.3 million TEUs for 2009, an 18.8 percent
decline from 2008’s 15.2 million TEUs.
• On the warehousing side of the equation, CB Richard Ellis
said the national vacancy rate reached 10.2 percent at the end of
June 2009, the highest since the second quarter of 2004.
• Material handling suppliers have also been hit hard by the
downturn. The Material Handling Industry of America reports
that new orders for the first half of 2009 dropped 44.9 percent
compared to the 2008 period, but forecasts the decline will slow
in the second half, bringing the year-end total decline to about 35
percent. Another 5 percent to 10 percent drop is expected in 2010
with a return to growth in early 2011.
0%
Mar-00
Sep-00
Material handling equipment manufacturing
forecast 2009-2010 vs. GDP
Mar-01
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Sep-11
We are not going to be rescued by another housing boom or the
surge in consumer spending that took the Dow Jones Index above
14,000 in October 2007. Further, “bailout” support is an unlikely
option for any organization without a fairy godmother.
What are the alternatives? “Waiting it out” is not an option;
rather, it’s a prescription for potentially irrecoverable loss of market
position — or worse.
A corollary to Schumpeter’s creative destruction theorem, from
Robert Simons of Harvard Business School, states that “the right
of any corporation to exist is not perpetual, but has to be continuously
earned.” Accordingly, whether it’s “thinking out of the box”
or breaking it when it’s not broken, it’s time for us to do some
entrepreneurial head clearing and take an innovative, bold but
measured approach to assessment of how best to leverage the hidden
opportunities within the current economic landscape. Given
the latter, leadership should focus on gaining buy in and support
from all employees by clearly articulating the challenges — and,
collaboratively building and implementing action plans that address
them showing specifically how individual performance impacts
results — and then broadcasting actual results on a daily, if not
hourly basis and explaining what has to be done to stay on target.
Although the light at the end of your economic tunnel may only
be a firefly today — regardless of where you are in the business
cycle — there is no time like the present for fine-tuning strategies
and action plans to be ready to charge out of the gate when the bell
rings. In fact, if your industry lags those that appear to be bottoming
out and on the way back up, there are still opportunities to batten
the hatches, increase efficiencies and control costs to facilitate the
recovery process. And, there’s good evidence that many organizations
have already started.
The balance of this article will focus upon how close examination
of supply chain options can produce the short and longer-term benefits
that sustain and differentiate world class corporate performers
in good times and bad.
Register and download the report at AmericanShipper.com/TF
6 AMERICAN SHIPPER: OCTOBER 2009
Annual Rate of Change
MH New Orders
GDP Nominal +3Q
MH Shipments
Forecast
8%
6%
4%
2%
0%
-2%
-4%
GDP four quarter percent change